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Supply chain

It rarely gets openly discussed, but having low or no visibility of the supply chain process is a constant source of personal frustration for all those responsible for and outwardly answerable to customers, buyers, or suppliers.

The typical scenario begins with “ Where is my order?” or, “When can I expect delivery,”

Regardless of the excuses, or reasons, low visibility instantly jacks up the pressure, and puts the business on the back foot. If they can’t instantly or quickly get an answer – while on the phone, then someone has to go and investigate, someone has to go upstream or downstream in the chain for answers, and then someone has to deliver the news, good or bad.

Supply Chain

What's The Problem?

Lack of visibility, or poor visibility of the Supply Chain is perhaps one of the most stressful, costly and yet unnecessary problems for any Distributor business. It’s easy to fix without spending a fortune on systems development.

It rarely gets openly discussed, but having low or no visibility of the supply chain process is a constant source of personal frustration for all those responsible for and outwardly answerable to customers, buyers, or suppliers.

The typical scenario begins with “ Where is my order?”or, “When can I expect delivery,”

Regardless of the excuses, or reasons, low visibility instantly jacks up the pressure, and puts the business on the back foot. If they can’t instantly or quickly get an answer - while on the phone, then someone has to go and investigate, someone has to go upstream or downstream in the chain for answers, and then someone has to deliver the news, good or bad.

This is all a total waste of time, because it just drains energy from more positive and proactive things that could drive better relationships, and can make the department look or feel stupid and inefficient.

In most businesses, there is someone, somewhere who’s enjoyment of coming to work is constantly eroded by constant firefighting. The main risks of doing nothing is, of course, eventual erosion of employee performance, seeing no end in sight - or the creation of meaningless and stressful jobs just to avoid angry suppliers and partners. The knock-on effects are high turnover of staff, or loss of confidence in the business all the way up to losing the business.

WHICH MEANS

Other distributors can easily differentiate with visibility technology and thereby gain competitive advantage, leaving the business behind, and facing an uncertain future.

This was the single biggest fear expressed to us by our clients when they searched for solutions to supply chain visibility.

Driving Out Cost

Driving out cost from the distribution supply chain is becoming increasingly harder to reach for many normal distributors in an industry obsessed with driving down costs and complexity. Yet it can still be done when you know where to look.

For years, Supply Chain initiatives have paid the way for other strategic priorities aimed at top line growth and boosting margins. In research, Aberdeen* describe ‘best-in class’ performance as having a better than:

82% forecast accuracy three months out ;

96% completed delivery on time;

26 day cash to cycle time .

Yet, because most businesses don’t have the resources to devoted dedicated cost reductions, they get left behind or have to live with the constant frustration of fire fighting with work-arounds.

Ernst and Young and the Economist Intelligence Unit (EIU)* recently reported how global leaders in Distribution are having to adapt their supply chains to cope with the sheer complexity of dealing with overseas suppliers as they look for new and stronger revenue sources while trying to manage risk and cost. The challenge is finding where costs can be made that do not damage service levels or growth. The issue for non global players, the rest of us, is that risks and costs are

WHICH MEANS

The reality for most Distributors is that few hold absolute power in the negotiation – they are caught in the middle between a powerful and demanding Supplier on one hand, and an increasingly complex web of b2b Buyers with low switching costs, enabled by the internet, on the other.

Margins are already thin, and it simply isn’t affordable to upgrade entire systems left behind by technological advances. The real problem lies in the fact that growth brings new trading relationships from unfamiliar places, and that complexity is diametrically opposed to the stable visibility needed to reduce costs.

To say distributors live in stressful times, is an understatement, because The real problem lies in the fact that growth brings new trading relationships from unfamiliar places, and that complexity is diametrically opposed to the stable visibility needed to reduce costs.

What’s Your Solution?

A Distributor, is only as good as his partners in the supply chain, and often dependent upon them. A recent survey at supplychain247 showed that 65% of retail buyers wanted next day delivery. B2B buyers are just as demanding within their own parameters. Speeding up the supply chain is built upon better decisions which are based on accurate and timely information. The solution lies in preventing information from ageing because the older it gets, the less reliable it is - and the bigger the amplified problem further along the chain. Real Data, better Decisions, Faster Delivery.

A Distributor, just like all businesses is entirely dependent on the end customer - who will mostly switch where possible rather than accept any delay to their gratification and demands. Other than the standard objective of reducing inventory costs in supply chain by creating a demand led production - risk is also best managed by creating a way to give controlled access and transparency to both sides - the ‘spend side’ which includes the whole purchase-to-paycycle, and the ‘order’ side which includes the order-to-cashcycle. Risk is massively reduced through collaboration across departments and external companies, all of whom have accurate, relevant and timely information.

Proactive inventory management policies will make a difference in your operations. By increasing visibility to suppliers process, you gain 100% visibility to whether pos have been received acknowledged and advance shipping notices are available. This allows you to more closely align your ordering on demand.

Inventory costs can be reduced by using forecasting models to reduce forecasting errors which in turn will reduce overstock, backorders, and the need for lateral or reverse logistics. Also, sharing information with upstream customers on upcoming needs also reduces demand variability and forecast error, thus reducing the safety stock required for a given customer service level.

By opening visibility to suppliers delivery times, sales can now make accurate forecasts and cash flow can be more easily coordinated based on real delivery by suppliers. Further, PWC report that interdepartmental transparency and improvements can be achieved by:

Training all stakeholders to get the most out of a common system

Use a system that best captures the data consistent to the departmental needs for Operational decision making

Reduce the number of transaction-specific portals being used

Reduce the time wasted by overlapping capabilities and potentially redundant legacies

“Achieving a good customer-focused system requires processing information both accurately and in a timely manner for quick response systems that require frequent changes in response to fluctuations in customer demand. Controlling uncertainty in customer demand, manufacturing processes, and supplier performance are critical.” For Lambert & Cooper, it is all about visibility.

These hidden costs most often lurk in a manual processing environment, where the same invoice may be handled multiple times, even before an approval decision is made. In addition to contributing to escalating labor costs, this increases the chances of missing favorable payment terms due to lengthy processing cycles.

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